I'm ripping my whole collection to ALAC as I type this, but I haven't decided what lossy codec I'm going to use. I've read that there were issues at one point with gaps and pops on iPods when playing Nero AAC files. I'd like to know if this is still the case or if it has been ironed out. I have a fair number of live recordings and studio albums that require gapless playback so I wouldn't want to encode my music in a way that would compromise this. The iPods involved are a 160gb Classic, a 120gb Classic and the newer 16GB Nano.

Works fine even with a 2years-old nero encoder on iPod Classic 160 Gb. I noticed one kind of gapless issues and it was with some very short (~10…20 seconds) tracks. I can't say if it's related to Nero AAC or to Ipod buffering system because it wasn't always reproducible.

I have an album that is encoded using LAME and is gapless, will it still be gapless if I transcode it to M4A using Nero's AAC encoder?

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With the adequate decoder (lame, foobar2000...), yes.

Besides that your resulting M4A is going to be of lower quality than a 96kbit/s MP3, probably. Transcoding means a substantial quality loss in contrast to plain encoding. When not going from like 320->320 kbit/s forget it. And even then your resulting file would be a huge waste of space and of no better quality than a 128kbit/s MP3.

The album is currently LAME -V2, I plan to encode it to Nero AAC -q 0.5

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As there is no known device which would be able to play AAC but not MP3 and a serious degradation of quality is to be expected, I don't see any sense in taking this discussion any further.

Was planning to play it on my iPod, and also save some space, as if it worked, I would encode my whole collection to m4a

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q .5 won't save you any noteworthy space. Instead you'll have ~192kbit/s files with a quality < 128kbit/s. That's a waste to me, not a saving.

Transcoding is not a good thing and results in a fair bit of (discernible) quality loss. This has been explained many times, including in this thread.
If you want smaller files, you might re-rip the cd's to Nero AAC. Or, if you don't hear the differences, then just transcode and use them for your portable player.
But you should definitely keep the original LAME V2 rips, don't discard them after transcoding.

I'll leave them alone then, thanks for the advice

Hi,i'm new to these amazing forums. I wanted to make a question related to Nero AAC and Ipod. Do iPods play normally Nero AAC VBR q.95 (around 400kbps)? Thank you in advance!

OP, should use search next time. Countless thread's out there already that discuss this to death.